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LawPulse

Bill would require personal service for debtors

By

Adam&nbspW.&nbspLasker

Pending legislation would require that debtors get personal service, not merely notice by mail, before courts begin key legal processes that could put them behind bars.

A proposed amendment to the Illinois Code of Civil Procedure would require that a person in debt be personally served with notice of petitions or citations regarding assets and be provided a hearing before the debtor could be incarcerated.

Opponents of the bill have claimed the legislation would create a debtors’ prison in Illinois, while those in favor say the new procedure would in fact help keep debtors out of prison, providing them with greater leeway to settle their debts without having to serve jail time.

House Bill 5434, which is officially titled the “Civil Law-Tech” bill, was co-sponsored by 14 house Democrats and three Republicans, including chief sponsor Rep. Ann Williams, D-11, and Rep. Sidney H. Mathias, R-53, who was the first Republican to join in supporting it.

The bill passed the house on a vote of 107-0-1 in late March, according to legislative reports, and the senate Judiciary Committee was in the process of making amendments as of early May.

The bill amends existing portions of the Code of Civil Procedure governing securities for costs and supplemental proceedings for collecting assets and income from judgment debtors who are natural persons. It would also create a new section of the Code, 735 ILCS 5/12-107.5, mandating that a debtor be served with a citation and notice of a hearing date by personal or abode service before any order of body attachment, civil contempt, or any other civil order for incarceration or detention could be issued by a court.

Better for debtors than body attachment

Attorney Stephen Olson, general counsel for the Illinois Credit Union League, said the new procedures could actually help debtors avoid jail time by giving them proper notice of the legal proceedings with which they must comply.

Olson said most of the judgment debtors who end up in jail were subject to an order of body attachment only because they failed or refused to participate in the legal process, leaving creditors with no real method of collecting what is owed them other than asking the court to track down and lock up the debtor. The new procedure, he said, could help alleviate the problem of debtors who were not aware of the pending actions against them, allowing them to show up in court to reach an agreement with creditors without a judge having to issue body attachment orders and arrest warrants.

“The attorney general back in the 1970s issued an opinion that the body attachment is not the punishment – it’s a procedure utilized by the courts to bring a party in front of the court when the party has not obeyed an order,” Olson said. “The court – not the creditor’s attorney – will decide which sanctions to impose.”

The body attachment was merely the mechanism for bringing the respondent before the court, but a common problem, according to Olson, was that police would find the debtor on a Friday afternoon when court is closed, and the debtor would have to spend a night or two in jail before the court reopened the following Monday.

“This [bill] will eliminate a lot of problems because if you’re the judgment debtor and the sheriff serves you personally with the rule to show cause [or other citations], you’re going to receive it and you’re going to know that you have to respond to it,” Olson said. “If there’s anyone who ever spent time in jail on a body attachment order, it’s only to get that person into court to have them appear in front of the judge to explain why they haven’t paid, or can’t pay, the debt.”

Personal service: “time-consuming and expensive”

Another portion of the proposed statute would require that citations served on the debtors include an income-and-asset worksheet that the debtor should complete and bring to the court hearings. Olson said many assets and income sources can be exempt from collection proceedings, and a respondent who convinces the court that they are unable to pay a debt will most likely not be sent to jail.

“This bill establishes a statutory pro forma income-and-asset form that would be personally served on the natural person judgment debtors,” Olson said. “That will facilitate the examination of the debtor at the citation hearing and help both the creditor’s attorney and the judge in determining if there are any nonexempt assets from which the judgment can be paid.”

Olson said creating a good procedural framework for debt collections requires a “balanced approach” that protects a lender’s right to repayment while also making sure that respondents are not incarcerated merely due to an inability to repay their debts. He said the attorney general’s office has been working for decades with legislatures, judges, and bar associations to create such a balanced approach.

“I think the approach taken [in this bill] is…reasoned and balanced,” Olson said. “There are important elements contained in this bill that, even though I’m a creditors’ lawyer, I think are fine. Before that potential sanction or process can be utilized by the court, the debtor really ought to know that they’ve been served with a rule to show cause, and this bill will accomplish that.”

Champaign lawyer Mark C. Palmer, who chairs the ISBA Local Government Law Section Council, sympathizes with the goals of the legislation but worries it could make debt-collection burdensome and expensive for many municipalities in Illinois.

“On the municipal side for local governments – at least downstate – our procedures for collecting [judgment debts arising from] ordinance violations use rules to show cause,” Palmer said. “For bigger municipalities with hundreds of cases, the requirement to personally serve notices is time-consuming, expensive – it’s almost impossible. You’d probably have to tie up all of your police officers to serve those notices.”